SA at risk of economic downgrade as Day Zero fast approaches

Yadhana Jadoo

Picture: Thinkstock

Because the economy will suffer, we run the risk of a downgrade from the ratings agencies.

With #DayZero fast approaching in the Western Cape and the possibility of taps running completely dry, South Africa’s economy could be severely affected if water refugees embark on a mass exodus to other provinces.

Added to this, experts say the Western Cape drought also has the potential to widely affect a number of sectors, resulting in South Africa experiencing a downgrade.

“When acute water scarcity hits, people have a choice. They either have to live with it or they can migrate,” said University of Free State Centre for Environmental Management Professor Anthony Turton.

Turton, a trained scientist specialising in water resource management, pointed to global studies of water scarcity, ultimately resulting in “a study of migration”.

“It becomes a push factor in human migration. Environmental scarcity ultimately results in resource capture. “I am speaking to people who own residential complexes in Cape Town. And I am speaking to one person that owns 10 such complexes. One has 300 units.

And they are already talking about people breaking their leases and leaving. They are saying they are not willing to go through it. It’s not a far-fetched concept.”

Economist Mike Schussler said there is also the potential for big firms moving from Cape Town to other parts in South Africa, including the economic hub of Johannesburg.

“We saw with the electricity crisis that South Africa missed out on a lot of growth.

A water crisis to me is a few times worse. There’s no rolling blackouts with water. It’s permanent,” Schussler said.

“If the crisis is over relatively quickly, I don’t think it would be a big problem. But if we have another drought, and it looks like it might happen again, a lot of people will start rethinking. IT, which is a big industry in Cape Town, could move.

They will go where they think there is water. “It’s a very difficult situation. If people queue for a week or two for water, it will be bad.

But if people queue for five months it would really impact. This is a big one and I pray it doesn’t happen.” Cape Town is also “not in a cocoon that lives in isolation”, he added.

“The impact is going to be quite large for all of us. The ratings agencies look at the overall growth of the country and the population growth. The impact is probably a downgrade. “This makes the cost of capital more expensive. When firms want to borrow, it will keep interest rates higher for longer.”

Schussler pointed to the number of industries and jobs that could be affected directly as a result of the agricultural sector not producing. “Cape Town is where we sell a lot of goods into SA. We buy from them.

If Cape Town doesn’t export wine, our current account balance is a bit more under threat.

“Their foodstuff is also under threat. Fruit that we export from the Cape will also be impacted, and this will impact our growth. If farmers can’t farm they will buy less fertilizer and seeds.

“Here we have the whole of agriculture that will impact the canning factories, for example.

Our jams and fruit juices, which come from the Cape, will now have to be imported which makes it more expensive.

Or, for other reasons, it won’t be available.

“The transport industry will also have a harder time because there will be less goods to transport. The harbour may be a bit busier because we will have to import a lot more.” All these scenarios would knock the economy, Schussler said.

And then there is the issue of tourism.

“Tourism to South Africa will be impacted. And that industry is even bigger than the gold industry nowadays,” he said.

“Jobs will be impacted. There’s no doubt about it. We will probably lose thousands if not hundreds of thousands of jobs.”

– yadhanaj@citizen.co.za.

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The South African Weather Service’s (Saws) latest seasonal prediction has not indicated significant rainfall expected during the 2018 autumn season for the south western parts of the country.

The Western Cape province will remain dry with the exception of some periods of light rain in areas along the south coast, according to Saws.

“In the short term, south-western parts of the Western Cape, including Cape Town, are expected to remain rain-free for the remainder of this and next week.”

Saws reminded that most rain in the Western Cape province falls during winter months.

“Very little rainfall is received during summer months. Rainfall in the Western Cape is often modulated by the passage of cold fronts. These cold fronts are systems that develop over the Southern Ocean, and the cross-continental passage of these fronts are important for Cape Town’s rainfall,” it said.

“Since cold fronts form part of a variable eastward propagating wave pattern of air flow over the Southern Ocean, the frequency of the cross-continental passage of cold fronts across the Western Cape province is difficult to predict at a seasonal time range, and more research is required into weather patterns.”